AMWatch has quizzed ten global asset managers about their view on the competitive landscape in the Nordics and the requirement to stand out from the crowd. This time, AMWatch turns to the world's largest bond house PIMCO where Patrick Dunnewolt is responsible for the Nordics.
How has the Nordic competitive landscape changed in recent years?
"The Nordic competitive landscape has created both challenges and opportunities in recent years. Insourcing has increased competition among existing investment managers in the Nordics, and also added pressure on investment managers to outperform.
External factors have also created new challenges; the influx of passive strategies, particularly in equities, is changing the competitive landscape, and regulatory directives such as MiFID II are requiring asset managers to dedicate additional resources to compliance and regulatory procedures.
The low-rate environment and search for yield has also driven increased interest in innovative investment solutions, including private strategies and alternatives. This creates opportunities for global investment managers to partner with clients. For example, PIMCO has seen success harnessing our Client Solutions Capabilities to optimize portfolio allocations and conduct bespoke portfolio analysis."
What do you consider to be the most important features for a global asset manager to become successful in the Nordics?
"As competition within the asset management industry is tough, it is important to differentiate from the market. Our ambition to be the premier fixed income managers helps in getting our message across clearly.
In addition to maintaining a consistent investment process at PIMCO, we want to demonstrate commitment to the Nordics and believe it is very important to keep a stable client-facing team.
Fee pressures have created pressure on smaller players, triggering M&A in the asset management sector. For this reason, stability of the firm and a future-proof business model is increasingly appreciated along with a consistent investment process. An understanding and appreciation of sustainability considerations in the Nordics is also crucial to be successful."
How is emphasis on ESG and sustainability different in your company’s home market compared to the Nordics?
"In the US, ESG integration has historically been something that many investors consider a nice-to-have, as opposed to a necessity.
Structurally there are some areas such as the Muni market that lends itself more to ESG, but the US has historically been slower than the Nordics to embrace ESG integration.
We see this changing with US investor demand for ESG strategies gradually catching up to the Nordics, both among institutions and individuals. Many institutional investors are seeking fuller disclosure of ESG-related metrics from companies, and private wealth investors are increasingly mandating both positive impact and financial returns from their allocations.
As a result, PIMCO continues to make significant investments in ESG throughout the firm. This includes investing in analysis, engagement, and technology, where we have built proprietary systems for evaluation and engagement tracking.
In 2019, PIMCO again received an A+ rating on our Strategy & Governance as well as Fixed Income processes in our UN PRI Assessment Report. We have also received very positive feedback from investors in the Nordics, which has given us confidence that we have a market-leading ESG offering in fixed income."
Which of your investment strategies are currently most in demand in the Nordics?
"As yields are lower and we are later in the cycle, active fixed income where risks are properly managed is increasingly in demand. Our dedicated ESG strategies have also been generating interest for some time, and we have seen increased interest in our views on private credit markets as well.
International fixed income allocations such as global bonds and emerging markets also remain in-demand, with many Nordic investors opting for our corresponding ESG strategies."